Web Letter Accuses Sunglass Retailer of Selling Bias

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Sunglass maker Oakley Inc. is using the Internet to ask consumers not to buy its products from Sunglass Hut International, a domestic retail chain acquired in April by Italian optical entity Luxottica Group SpA.


In an open letter posted Aug. 2 at www.oakley.com/alert, the manufacturer accused Luxottica of refusing to stock Oakley's 2001 line of eyewear at Sunglass Hut locations. The Oakley line in dispute includes the X Metal Penny, Scar, Why3 and Four S, priced from $70 to $275.


"We want our retailers to be supportive of our brand and offer our customers a fair representation of our product line, and it's something they were unwilling to do," said Link Newcomb, chief operating officer at Oakley, Foothill Ranch, CA.


Sunglass Hut was not immediately available for comment.


Newcomb alleges that Sunglass Hut staff has been told to promote Luxottica brands Ray-Ban, Revo, Vogue, Arnette and Killer Loop over Oakley products. This is a big blow for Oakley, since Sunglass Hut accounts for 20 percent of sales. Oakley posted revenue last year of $363 million.


"It's a very unusual situation to begin with, because it's not common in the consumer products world that a company with our leadership position [that] our biggest customer as of this past April is also our biggest competitor," Newcomb said.


The online letter, supported by a press statement revising 2001 sales and earnings projections, was posted after Oakley received Sunglass Hut orders July 25. Besides the direct URL, customers can also access the letter by clicking on a skull-and-bones "Customer Alert" image on oakley.com's homepage.


"Being an Oakley consumer requires a willingness to think differently and now, with this letter, we at Oakley are making this personal request of you to shop differently," the letter from Team Oakley said.


Online visitors are then asked to shop at other mall chains, like Champs Sports and Finish Line, and retailers specializing in sunglasses, sports and optical items.


"Don't let Sunglass Hut's new bias hinder your ability to find the latest and greatest Oakley products," the letter says. It goes on to direct consumers to check the Web site for Oakley retailers in their area or call a toll-free number.


"In the end, you have alternatives to Sunglass Hut; they don't have alternatives to you," the letter says in closing.


Oakley's predicament with Luxottica and Sunglass Hut, Coral Gables, FL, is the result of relying on a single retailer for a large chunk of business. Realizing that mistake, Oakley intends to expand its product offerings in non-sunglass categories and cultivate other retailers.


As part of a new distribution strategy, Oakley will establish a premium dealer program to reward retailers that support the brand. It also will seek more shelf space with regional and national mall retailers that directly compete with Sunglass Hut.


In fact, Oakley has already contacted, or plans to, chains including Champs Sports, Finish Line, Galyan's, Nordstrom and Footlocker. It will open more company-owned "O" stores that stock the Oakley line of sunglasses, goggles, footwear, prescription eyewear, apparel and watches.


Newcomb said Oakley products were sold at 1,700 Sunglass Hut stores. Relations now have become so strained that Oakley is no longer able to gauge Luxottica's future orders or timelines.


Moreover, Oakley does not receive any information about the sales and inventory levels of Oakley products within the Sunglass Hut franchise. While the exact date has not been set, Oakley intends to launch another marketing assault using the Internet.


"We will probably, in the span of the next few weeks, tell every one of our 23,000 dealers that compete with Sunglass Hut in most places around the world to look at our Web site," Newcomb said. "It's an extremely important global tool for communicating efficiently to lots of customers."


Oakley.com, on average, attracted 10,000 unique visitors a month in 2000, according to the latest data available. The site, which started selling in the summer of 1999, last year accounted for $6 million in sales.


Newcomb is not sure when the letter will be taken off the site.


"What we hope to achieve," he said, "is that when someone walks into the mall, it goes off in their brain, 'I want Oakley, but I don't want to go to a Sunglass Hut; I'll find another sunglass store here or an optical store or a Champs store.'"


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